Are less developed countries more exposed to multinational tax avoidance? Method and evidence from micro-data

TY - UNPB

T1 - Are less developed countries more exposed to multinational tax avoidance?

T2 - Method and evidence from micro-data

AU - Johannesen, Niels

AU - Tørsløv, Thomas Rasmusen

AU - Wier, Ludvig

N1 - JEL classification: H25, H26, H87, O23

PY - 2016

Y1 - 2016

N2 - We use a global dataset with information on 210,000 corporations in 102 countries to investigate whether cross-border profit shifting by multinational firms is more prevalent in less developed countries. We propose a novel technique to study aggressive profit shifting and improve the credibility of existing techniques.Our results consistently show that the sensitivity of reported profits to profit-shifting incentives is negatively related to the level of economic and institutional development. This may explain why many developing countries opt for low corporate tax rates in spite of urgent revenue needs and severe constraints on the use of other tax bases.

AB - We use a global dataset with information on 210,000 corporations in 102 countries to investigate whether cross-border profit shifting by multinational firms is more prevalent in less developed countries. We propose a novel technique to study aggressive profit shifting and improve the credibility of existing techniques.Our results consistently show that the sensitivity of reported profits to profit-shifting incentives is negatively related to the level of economic and institutional development. This may explain why many developing countries opt for low corporate tax rates in spite of urgent revenue needs and severe constraints on the use of other tax bases.

KW - Faculty of Social Sciences

KW - developing countries, international taxation, multinational firms, profit shifting, tax avoidance, tax evasion

KW - H25

KW - H26

KW - H87

KW - O23

M3 - Working paper

SN - 978-92-9256-050-8

T3 - UNU WIDER Working Paper Series

BT - Are less developed countries more exposed to multinational tax avoidance?

PB - UNU-WIDER

CY - Helsinki, Finland

ER -